Banks in UAE will face Dubai World fallout in second quarter

The UAE’s central bank last week reportedly told local banks that they “are not required to provision their related exposure to Dubai World,” 7DAYS reported Monday.

Once the debt restructuring proposal is accepted, however, banks will be required to announce the “accounting impact,” explained Deepak Tolani, of Al Mal Capital. As banks begin provisioning, balance sheets will take a hit, and second quarter could post negative results.

“UAE banks are likely to face the brunt of the Dubai World restructuring impact in the second quarter of 2010 after the central bank told lenders they are not required to book provisions until there is more clarity,” 7DAYS reported Monday.